Publications

2026

The Potential of Carbon Border Adjustments to Foster Climate Cooperation (with Timothé Beaufils and Leonie Wenz), conditionally accepted at the Journal of the Association of Environmental and Resource Economists.

Abstract: We evaluate the potential of the European Union’s Carbon Border Adjustment Mechanism (EU CBAM) to foster a climate coalition. Using a general equilibrium quantitative trade model to evaluate the payoffs of a coalition formation game, we find that the EU CBAM motivates the adoption of carbon pricing in four countries. This results in a 73% greater reduction in global emissions compared to a scenario in which only the EU prices carbon, with the coalition-building effect outweighing the direct anti-leakage effect of the CBAM. This effect holds across a broad range of policy designs and modelling assumptions. The size of the induced climate coalition varies strongly with trade elasticities and marginally with input substitutability. Next to the carbon price level, the CBAM implementation plays a decisive role: a CBAM that covers more products or indirect emissions leads to larger coalitions. By contrast, introducing export rebates renders the coalition unattractive.

2025

Doding Trade Sanctions? Evidence from Military Goods (with Lisa Scheckenhofer and Feodora Teti), AEA Papers & Proceedings, 115, pp. 573–77.

Abstract: The Russian invasion of Ukraine in 2022 led to unprecedented sanctions aimed at denying Russia access to critical technologies essential for sustaining its war efforts. This paper examines whether trade sanctions targeting military goods were undermined by evasion, specifically through transshipment via Russia-friendly countries. We find that Russia-friendly countries were 20 percentage points more likely to export military goods to Russia relative to neutral countries after the war began, while exports of military goods from Western allies to these countries also increased. Our results show that weak enforcement significantly undermines the effectiveness of sanctions.

Trade and the environment, trade policies and environmental policies—How do they interact? (with Gabriel Felbermayr and Sonja Peterson), Journal of Economic Surveys, 39(3), pp. 1148-1184.

While international trade can offer gains from specialization and access to a wider range of products, it is also closely interlinked with global environmental problems, above all, anthropogenic climate change. This survey provides a structured overview of the economic literature on the interaction between environmental outcomes, trade, environmental policy and trade policy. In this endeavor, it covers approaches reaching from descriptive data analysis based on Input‐Output tables, over quantitative trade models and econometric studies to game‐theoretic analyses. Addressed issues are in particular the emission content of trade and emissions along value chains, the relocation of dirty firms and environmental impacts abroad, impacts of specific trade polices (such as trade agreements or tariffs) or environmental policy (such as Border Carbon Adjustment), transportation emissions, as well as the role of firms. Across the different topics covered, the paper also tries to identify avenues for future research, with a particular focus on extending quantitative trade and environment models.

2024

The Consequences of Non-Participation in the Paris Agreement (with Mario Larch), European Economic Review, 163, 104699.

Abstract: We develop a multi-sector structural trade model with emissions from production and a constant elasticity of fossil fuel supply function to simulate the consequences of unilateral withdrawals from the Paris Agreement. Taking into account both direct and leakage effects, we find that a US withdrawal would eliminate a third of the world emissions reduction (25.7% direct effect and 7% leakage effect), while a potential Chinese withdrawal lowers the world emission reduction by 19.4% (8.2% direct effect and 11.2% leakage effect). The substantial leakage is primarily driven by technique effects induced by falling international fossil fuel prices.

Brothers in Arms: The Value of Coalitions in Sanctions Regimes (with Sonali Chowdry, Julian Hinz, and  Katrin Kamin), Economic Policy, 39(118), pp. 471-512.

This paper examines the impact of coalitions on the economic costs of the 2012 Iran and 2014 Russia sanctions. By estimating and simulating a quantitative general equilibrium trade model under different coalition set-ups, we (i) dissect welfare losses for sanction-senders and target; (ii) compare prospective coalition partners and; (iii) provide bounds for the sanctions potential — the maximum welfare change attainable — when sanctions are scaled vertically, i.e. across sectors up to an embargo, or horizontally, i.e. across countries up to a global regime. To gauge the significance of simulation outcomes, we implement a Bayesian bootstrap procedure that generates confidence bands. We find that the implemented measures against Iran and Russia inflicted considerable economic harm, yielding 32 – 37% of the vertical sanctions potential. Our key finding is that coalitions lower the average welfare loss incurred from sanctions relative to unilateral implementation. They also increase the welfare loss imposed on Iran and Russia. Adding China to the coalition further amplifies the welfare loss by 79% for Iran and 22% for Russia. Finally, we quantify transfers that would equalize losses across coalition members. These hypothetical transfers can be seen as a sanctions-equivalent of NATO spending goals and provide a measure of the relative burden borne by coalition countries.

2021

A Tale of (Almost) 1001 Coefficients: Deep and Heterogeneous Effects of the EU-Turkey Customs Union (with Mario Larch and Aiko Schmeißer), Journal of Common Market Studies, 59(2), pp. 242-260.

Abstract: In view of the deferred start of negotiations for the modernization of the Customs Union between the EU and Turkey (CU-EUT), we look back and analyse the ex post trade consequences of the CU-EUT. Employing up-to-date econometric best practices for regional integration agreements, we quantify both total and heterogeneous trade effects of the CU-EUT. In contrast to most previous studies, our results indicate a significantly positive, large, and robust impact of the CU-EUT, implying an additional increase in EU-Turkey manufacturing trade by 55-65% compared to the previously active Ankara Agreement. We also provide evidence that the CU-EUT significantly increased Turkey’s trade with third countries. Additionally, a substantial heterogeneity in the CUEUT effect is found across different industries as well as for each of its member countries and the direction of trade. We link the heterogeneity of our up to 911 coefficient estimates to differences in initial trade costs and show that it cannot be ascribed to reductions in bilateral tariff rates.

Worth the Pain? Firms’ Exporting Behaviour to Countries under Sanctions (with Matthieu Crozet, Julian Hinz, and Amrei Stammann), European Economic Review, 134, 103683.

Abstract: How do exporting firms react to sanctions? Specifically, which firms are willing — or capable— to serve the market of a sanctioned country? We investigate this question for four sanctions episodesusing monthly data on the universe of French exporting firms. We draw on recent econometric advances in the estimation of dynamic fixed effects binary choice models.We find that the introduction of new sanctions in Iran and Russia significantly lowered firm-level probabilities of serving these sanctioned markets, while the (temporary) lifting of the U.S.\ sanctions on Cuba and the removal of sanctions against Myanmar had no or only small trade-inducing effects, respectively.Additionally, the impact of sanctions is very heterogeneous along firm dimensions and by case particularities. Firms that depend more on trade finance instruments are more strongly affected, while prior experience in the sanctioned country considerably softens the blow of sanctions, and firms can be partly immune to the sanctions effect if they are specialized in serving ``crisis countries''. Finally, we find suggestive evidence for sanctions avoidance by exporting indirectly via neighboring countries.

2019

Currency Unions and Trade: A PPML Re-assessment with High-Dimensional Fixed Effects (with Mario Larch, Yoto V. Yotov, and Thomas Zylkin), Oxford Bulletin of Economics and Statistics, 81(3), pp. 487–510.

Abstract: Recent work on the effects of currency unions (CUs) on trade stresses the importance of using many countries and years in order to obtain reliable estimates. However, for large samples, computational issues associated with the three-way (exporter-time, importer- time, and country pair) fixed effects currently recommended in the gravity literature have heretofore limited the choice of estimator, leaving an important methodological gap. To address this gap, we introduce an iterative poisson pseudo-maximum likelihood (PPML) estimation procedure that facilitates the inclusion of these fixed effects for large data sets and also allows for correlated errors across countries and time. When applied to a compre- hensive sample with more than 200 countries trading over 65 years, these innovations flip the conclusions of an otherwise rigorously specified linear model. Most importantly, our estimates for both the overall CU effect and the Euro effect specifically are economically small and statistically insignificant. We also document that linear and PPML estimates of the Euro effect increasingly diverge as the sample size grows.

Review of Thermophysical Property Data of Octadecane for Phase-Change Studies (with Moritz Faden, Stephan Höhlein, Andreas König-Haagen, and Dieter Brüggemann), Materials, 12(18), 2974.

Abstract: In this work we derive temperature-dependent functions for the most important material properties needed for phase change studies with octadecane. Over 80 references are reviewed in which at least one thermophysical property of octadecane is measured. The functions are valid ±40 K around the melting temperature and are surrounded by their confidence interval. It turns out that the values for the solid phase have much broader confidence intervals than the ones of the liquid phase. Hence, more accurate measurements are particularly desirable for the solid state material properties.

2018

Bi- and Unilateral Trade Effects of Joining the Euro (with Mario Larch and Yoto V. Yotov), Economics Letters, 171, pp. 230–234.

Abstract: We propose a simple theoretically consistent adjustment for structural gravity estimations of the EMU impact on international trade. Our methods result in two contributions to the related literature. First, we show that proper control for intra-national trade flows leads to larger, positive, and statistically significant bilateral EMU effects. The intuition is that joining the EMU promotes trade among member countries at the expense of trade diversion from domestic sales. Second, the introduction of intra-national trade flows enables us to identify Unilateral effects of joining the Euro between members and non-member countries. The unilateral effects are also positive, sizable and statistically significant.

Can Degrowth Overcome the Leakage Problem of Unilateral Climate Policy? (with Mario Larch and Markus Löning), Ecological Economics, 152, pp.118–130.

Abstract: Unilateral climate policy suffers from carbon leakage, i.e. the (partial) offset of the initial emission reduction by increases in other countries. Different than most typically discussed climate policies, degrowth not only aims at reducing the fossil fuel use in an economy, but rather (besides other social and political goals) at a reduction of all factor inputs, which may lead to different leakage implications. We conduct the first investigation of de- growth in a multi-country setting in order to (i) compare the leakage effects of national pure emission reduction policies to degrowth scenarios, (ii) identify underlying channels by decomposing the implied emission changes into scale, composition, and technique effects, and (iii) investigate which country characteristics determine degrowth's relative effectiveness to overcome the leakage problem. Using a structural gravity model, we find that degrowth indeed significantly reduces leakage by keeping the sectoral composition of the country more stable and reducing uncommitted countries' incentives to shift towards more energy-intensive production techniques. The higher effectiveness of degrowth in reducing carbon emissions is most pronounced for small and trade-open economies with comparatively clean production technologies.

2017

Carbon Tariffs: An Analysis of the Trade, Welfare and Emission Effects (with Mario Larch), Journal of International Economics, 109, pp.195–213.

Abstract: The potential of carbon tariffs to restore competitiveness, avoid carbon leakage, and reduce global carbon emissions has been prominently discussed. To analyze the effects of carbon tariffs on trade, welfare, and carbon emissions, we develop a multi-sector, multi-factor structural gravity model that allows an analytical and quantitative decomposition of the emission changes into scale, composition, and technique effects. Our analysis shows that carbon tariffs are able to reduce world emissions, mainly via altering the production composition within and across countries, hence reducing carbon leakage. This reduction comes at the cost of lower world trade flows and lower welfare, especially for developing countries. Applying our framework to investigate the effects of the emission reduction pledges made by the Annex I countries in the Copenhagen Accord, we find that combining national emission targets with carbon tariffs would increase the Accord's effectiveness by lowering the leakage rate from 13.4% to 4.1% (with bootstrapped 95% confidence intervals of [11.5, 15.8] and [3.3, 4.9], respectively).

Current Working Papers

New Trade Models, Same Old Emissions? (with Robin Sogalla and Yuta Watabe), IDE Discussion Paper No. 926, invited for revision at the Journal of the European Economic Association.

Abstract: This paper investigates the elusive role of productivity heterogeneity in new trade models in the trade and environment nexus. We contrast the Eaton-Kortum and the Melitz models with firm heterogeneity to the Armington and Krugman models without heterogeneity. We show that if firms have a constant emission share in terms of sales --- as they do in a wide range of trade and environment models --- the three models' emission predictions exactly coincide. Conversely, if firms have a constant emission intensity per quantity --- a prominent alternative in the literature --- the emission equivalence between the three models breaks. We provide a generalization that nests both constant emission shares in sales and constant quantity emission intensities as special cases. We calibrate the models to global production and trade data and use German firm-level data to estimate the key elasticity of how emission intensity changes with productivity. Our multi-industry quantification demonstrates that the role of firm heterogeneity depends both on the model and the estimated parameters. Moving from the Armington model to the EK model increases the emissions effect on trade, while moving from the Krugman model to the Melitz model decreases the emission effects on trade.

The Carbon Footprint of Global Trade Imbalances (with Hendrik Mahlkow), CESifo Working Paper No. 10729, invited for revision at The World Economy.

Abstract: International trade is highly imbalanced both in terms of values and in terms of embodied carbon emissions. We show that the persistent current value trade imbalance patterns contribute to a higher level of global emissions compared to a world of balanced international trade. Specifically, we build a Ricardian quantitative trade model including sectoral input-output linkages, trade imbalances, fossil fuel extraction, and carbon emissions from fossil fuel combustion and use this framework to simulate counterfactual changes to countries' trade balances. For individual countries, the emission effects of removing their trade imbalances depend on the carbon intensities of their production and consumption patterns, as well as on their fossil resource abundance. Eliminating the Russian trade surplus and the US trade deficit would lead to the largest environmental benefits in terms of lower global emissions. Globally, the simultaneous removal of all trade imbalances would lower world carbon emissions by 0.9 percent or 295 million tons of carbon dioxide.

Tariffs Hit Differently: The Regional Impact of US tariffs across Europe and the Role of the Single Market (with Gabriel Felbermayr, Julian Hinz, Sebastian Krantz, and Hendrik Mahlkow), Kiel Working Paper 2309, reject & resubmit at the Journal of Economic Geography.

Abstract: How do adverse global trade shocks affect sub-national outcomes, and what insurance does regional integration provide? We study the EU Single Market using a large-scale quantitative trade model with regional labour mobility, calibrated to a new NUTS2- based Regionalized Inter-Country Input–Output (REICIO) database. Comparing four baselines, from a fully frag-mented Europe to deep integration, we evaluate the 2025 US tariffs. Full integration of EU goods and labour markets reduces the average regional loss in real value added per capita by about 25% and more than halves its dispersion. Further deepening barely improves the mean but compresses the distribution of regional impacts even further.

The Economic Logic of Policies to Address Import Dependence in Clean Energy Goods (with Michael Jakob, Matthias Kalkuhl, Robert Marschinski, and Michael Mehling), CEEPR WP 2025-17, submitted upon inviation to WIREs Climate Change.

Abstract: The fragmentation of global supply chains and rising geopolitical tensions have spurred concerns about import dependence. These concerns are particularly pronounced for clean energy technologies and critical raw materials, which are not only essential for climate change mitigation but are also viewed as important drivers of future productivity gains and economic growth. This paper contributes to the debate by analyzing challenges related to import dependence from the perspective of market failures, asking under which circumstances import dependence is the symptom of a market failure. On this basis, we discuss ways to assess the benefits and costs of different policies that have been proposed to address import dependence, derive implications for policy makers, and identify future research needs.

The Geopolitical Externallity of Climate Policy (with Timothé Beaufils, Killian Conyngham, Marlene de Vries, Michael Jakob, Matthias Kalkuhl, Philipp Richter, Daniel Spiro, and Lennart Stern), Kiel Working Paper No. 2283.

Abstract: This paper formalizes the geopolitical externality of climate policy and estimates its plausible magnitudes. Specifically, domestic reductions in fossil fuel demand depress global prices, thereby lowering export revenues for resource-rich autocracies – many of which allocate substantial resources to military spending. As a result, climate policy reduces geopolitical and security burdens on Western democracies, offering a potential “peace dividend” as a cobenefit. Exploiting the link between the European Union’s oil consumption and the EU’s costs of the Russian war in Ukraine as a case study, we highlight the relevance of this externality. We estimate that each euro spent on oil in the EU generates geopolitical costs of 0.37 [0.01 - 4.7] euros related to Russia’s war on Ukraine. Based on our central estimate, a carbon price of 62 euros per ton of CO2 would be required to internalize these costs. Even under conservative assumptions, our analysis highlights that the geopolitical externality offers a compelling argument for strong unilateral efforts to reduce fossil fuel demand in the EU.

State Dependence and Unobserved Heterogeneity in the Extensive Margin of Trade (with Julian Hinz and Amrei Stammann, previously Persistent Zeros: The Extensive Margin of Trade, Kiel Working Paper No. 2139). (link to the latest version)

Abstract: We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we propose new bias-corrected dynamic binary choice estimators with three sets of high-dimensional fixed effects. Monte Carlo simulations confirm their desirable statistical properties. A reassessment of the most commonly studied determinants of the extensive margin of trade demonstrates that both true state dependence and unobserved heterogeneity contribute strongly to trade persistence and that taking this persistence into account matters significantly in identifying the effects of trade policies on the extensive margin.

Selected Work in Progress

International Trade, Nominal Wage Rigidities, and the Unemployment Effects of Decarbonization (with Paul Ko, Mario Larch, Yuta Suzuki, and Han Yang).
Multinational Production, Trade, and Carbon Emissions (with Yuta Watabe).
Gravity with Persistence (with Amrei Stammann and Tom Zylkin).
Evading Sanctions (with Lisa Scheckenhofer, Feodora Teti, and David Torun).
Climate Change, International Trade, and Adaptive Capital Accumulation (with Pietro Fasoli, Mario Larch, and Tim Lüdiger).
Solar Radiation Management and Trade (with Pietro Fasoli, Daniel Heyen, Sarah Spycher, and Alessandro Tavoni).
Simple Fixed Effects Estimators for Undirected (Panel) Networks With Applications to International Agreements (with Mario Larch and Amrei Stammann).
Trade Agreements and Informality in Africa (with Julian Hinz, Oliver Krebs, and Hendrik Mahlkow).
Distributional Effects of the European Union Carbon Border Adjustment Mechanism (with Timothé Beaufils, Johannes Gallé, Michael Jakob, Matthias Kalkuhl, and Jan Steckel).

Software

glmhdfe (with Julian Hinz and Alexander Hudlet), R package.

The R package glmhdfe implements a fast estimation procedure of generalized linear models with high dimensional fixed effects. The package makes use of a convenient property of some combinations of error term distributions and link functions, where the fixed effects have — conditional on all other estimated parameters — an explicit solution.